The Western Australian economy will return to average growth levels over the coming two financial years as the resources investment boom fades, according to Chamber of Commerce and Industry WA chief economist John Nicolau.
The Western Australian economy will return to average growth levels over the coming two financial years as the resources investment boom fades, according to Chamber of Commerce and Industry WA chief economist John Nicolaou.
CCI also believes the state recorded a 3.75 per cent growth rate last financial year, lower than expected.
The slowing was due to weak consumer spending activity and falling business investment.
“While the decline in business investment activity was expected, weaker consumer spending only emerged once it was evident the low levels of consumer and business confidence had become entrenched,” Mr Nicolaou said.
“While business investment is expected to fall further over the next two financial years, as major resources construction projects move towards the completion stage, the decline is likely to be reduced by renewed investment plans from businesses outside of the resources sector, following a number of years of conservatism.”
Export growth is expected to continue to grow strongly after capacity expansions in the resources sector.
Exports increased 20 per cent during the March quarter on the same time last year, with exports valued $34.3 billion.
They are forecast to grow 8 per cent in 2014-15 and a further 5 per cent in 2015-16.
Unemployment has increased marginally to 5 per cent, but is expected to remain broadly unchanged over the next two years as the resources sector moves to the less labour-intensive production phase.
Industries outside the sector are expected to ensure job creation remains robust.
These factors will keep wage inflation controlled and see skills shortages become more isolated, with CCI forecasting Wage Price Index growth of 3.5 per cent, down from up to 6 per cent during the investment boom.
Low consumer confidence will keep consumer spending subdued, and it is projected to increase 3 per cent in 2014-15 and 4 per cent in 2015-16.
This is an improvement from a post-GFC low of 2 per cent last year.
Mr Nicolau said housing construction would continue to play a key role in the local economy.
“Low interest rates and pent up demand due to strong population growth is all contributing, with the number of houses that have commenced construction just shy of 28,000 in the first half of 2014- a record high,” he said.
But he believed the overall outlook was positive.
“There is much to be positive about with the WA economy,’’ Mr Nicolau said.
“While the transition is under way, and there is pain being felt across some sectors as they adjust to a more normalised growth profile, WA remains a state of great opportunity."